Technology partnerships break cultural barriers for microinsurers

If the law of attraction is anything to go by, then conversations on imminent disasters should not be entertained lest they invoke images of the Grim Reaper’s scythe.

But if you survive the scythe, you are left with scars that might take time to heal. It is in this space that the insurance business thrives,

With a penetration rate of 2.9 per cent as a factor of the country’s Gross Domestic Product (GDP), according to the Association of Kenya Insurers (AKI), the majority of businesses are seeking to attract the low and middle-income markets with microproducts.

However, a major setback is the cultural barrier, which AKI noted in its July 2023 study titled The State of Microinsurance in Kenya.

“(There is) a culture of not dealing with uncertainty avoidance. Some cultural and religious beliefs discourage people from taking insurance covers,” the study reads.

Kenya Re Group Managing Director Dr Hillary Wachinga in an interview with Enterprise noted that the Group has suffered losses that microinsurance should have catered for.

“We have paid claims for Gikomba fires many times,” he said.

When Madison Insurance approached the re-insurer for security for a microinsurance product, Kenya Re saw an opportunity.

“It turned out to be very profitable. We actually took up to 60 per cent participation,” he said.

Dr Wachinga said they are working with other partners on micro life insurance products.

“Statistics show in some markets, people are making money out of it,” he said.

According to AKI, health, last expense, and personal accident are the top three microproducts with the most potential in the Kenyan market.

Some of these products, however, are taboo in most Kenyan and generally African cultures.

This makes it a challenge for insurance providers and their aggregators to sell such products.

It is even more daunting to pitch them to low-income and less-educated populations.

Bryan Nyutu, general manager, Turaco, an insuretech firm, notes that education is a key factor if such products are to penetrate the low and low-middle income bracket. This education has to be done in the language the population understands.

“People do not necessarily wake and want to buy insurance, but they do wake up facing real risks, and once you educate and give them testimonials, that enhances trust,” he said when the firm paid claims to traders at Toi Market who had been affected by a fire.

Turaco had partnered with Musoni Microfinance, which embedded the product in the financial products it offers to the traders. In the event of fire, hospitalisation or death, the loan is paid off by the insurer.

“What are the realities of tomorrow if your spouse is not there? What would your life look like? Education helps them appreciate these things happen,” said Musoni Microfinance Chief Executive Barbra Asumadu.

Mr Nyutu said technology and such partnerships also make it possible for microinsurance products to penetrate the underinsured and uninsured.

“Technology gives us a lot of data that we typically wouldn’t have had. Once we are able to access it through the integration we have with Musoni, we are able to look at the demographic of the people we are going to distribute these products to,” he said.

Technology also makes policy administration easier as this ensures the cover is issued in real-time.

“As soon as you access that information, your cover is issued such that if a borrower, God forbid, incurs a loss just a day, or the next minute. This can only be done via technology,” said Mr Nyutu.

Technology also screens the claims through fraud-scoring algorithms that help during the payment process. This reduces the turnaround time.

The study by AKI points out that one of the gaps in the sector include the lack of innovation. As such, there is no optimal uptake to guarantee good returns.

Although microinsurance products have incorporated digital aspects into the value chain, AKI says there is a need for digital acceleration.

“Experts perceive that conventional face-to-face is not sustainable for micro products. They also perceive that insurance companies might be taking longer to adapt to the digital routes,” says the lobby.

According to AKI, in 2015, 15 underwriters had microinsurance products, with the number rising to 18 in 2022.

“Microinsurance products have increased both in numbers and types. While a few have been ‘dropped,’ these have mainly gone through restructuring and rebranding,” reads the July 2023 study.

For example, there were two micro-insurance products in the agriculture space in 2015. The number stood at five in 2022.

The last expense stood at four and six in 2022. Health microinsurance products, on the other hand, increased to nine in 2022 from six in 2015.

There was no domestic or home microinsurance product in 2015 but there were two in the market in 2022. Life also increased by one product to two in 2022.

Overall, microinsurance products increased to 55 in 2022 from 32 in 2015. Of these, health led with nine, followed by last expense (six), agriculture and personal accident (each with five), livestock and SME (each with three) and bodaboda/tuk-tuk with two.

Britam’s flood insurance is the latest microinsurance product in the market. The firm, through its reinsurance Swiss Re, paid out Sh14.1 million to flood victims associated with the recent El Nino rains.

The payout was made to 300 households in Madogo Ward, Tana River County, whose policies were sponsored by Oxfam in the pilot product.

Director of Emerging Consumers at Britam Saurabh Sharma, whose department also focuses on micro insurance products, said the pilot is meant to demonstrate to the residents that insurance can be trusted.

“We want to create awareness around those claims and show families insurance actually pays and flood risk is something that can be covered,” he said.

“Rural families do not understand insurance and maybe their trust level is low, but I think there is nothing more tangible than paid claims to show that insurance can make payments.”